Evaluating Allegiant Travel’s Valuation Amid December Traffic Rise and Load Factor Dip
Allegiant Travel (ALGT) has released its traffic report for December 2025. The report indicates a rise in passenger counts, available seat miles, and revenue passenger miles compared to the previous year. However, the annual load factor has declined slightly.
Traffic Performance and Share Price Analysis
In the last 90 days, Allegiant experienced an impressive 52.73% increase in share price. Conversely, over the past year, total shareholder returns declined by 9.39%. This suggests that the recent share price momentum stems from a weaker base.
With the current share price at $88.63, which is below the estimated intrinsic value of $99.40, Allegiant is viewed as modestly undervalued based on projected growth and margin expectations.
Fleet Modernization Initiatives
The airline is modernizing its fleet. Plans include increasing the availability of MAX aircraft to 20% of available seat miles by the year 2026 while phasing out older Airbus models. This transition aims to lower fuel and maintenance costs, potentially reducing cost per available seat mile (CASM) and improving net margins by enhancing operational efficiency.
Valuation and Risks
- Current Share Price: $88.63
- Intrinsic Value Estimate: $99.40
- Gap Between Cash Flow Value and Price: $1,042.76 per share
Despite optimistic projections, there are significant risks. Soft domestic leisure demand and rising labor or fleet transition costs could challenge Allegiant’s valuation outlook.
Future Forecasts
The discounted cash flow (DCF) model indicates a potential cash flow value of approximately $1,042.76 per share, which contrasts starkly with the current price of $88.63. Investors should consider whether the cash flow forecasts are realistic.
Diversifying Investment Opportunities
For investors interested in Allegiant Travel, it may be prudent to explore additional investment opportunities within the aerospace and defense sectors. Researching multiple candidates can help mitigate risks associated with relying solely on one stock.
In summary, Allegiant Travel’s recent performance and strategic initiatives present an intriguing narrative. Yet, potential investors must weigh both the promising growth prospects and the inherent risks before making decisions.
